YOU DECIDE: What makes North Carolina's economies tick?

February 23, 2007

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Although we frequently talk about the North Carolina economy, the truth is that our state, like most, really is made up of many local economies.

While linked, these economies differ from each other, because local economies, like people, tend to specialize in work they do best.

So when we look at North Carolina, we see the Triangle's high-tech economy, the Charlotte banking center, the coastal and mountain tourist and second-home locations, the coastal plain's agricultural communities and the Triad and foothills' traditional manufacturing centers.

But these local economies are not moving and changing at the same pace.

Clearly international and national forces of the past 25 years that set our economy's course helped some of the state's regions while simultaneously hindering others. For example, the Triangle, with its foot firmly planted in higher education, was a natural fit for the technology and research companies that blossomed in the modern era.

Likewise, the Charlotte economy benefited from banking deregulation, and mountain and coastal communities saw an influx of money from financially successful households and retirees seeking the natural amenities those areas have to offer.

But on the flip side, local economies still rooted in the traditional sectors of textiles, apparel, furniture and tobacco are in transition. They've lost employment and investments in those traditional industries, but haven't necessarily been able to attract businesses, especially those that pay well.

The economic divides in North Carolina are not drawn along lines that reflect big versus small or even urban versus rural. Certainly large, urbanized areas like the Triangle and Charlotte have done well, but so too have smaller cities like Asheville, Boone and Wilmington and lightly populated regions in the west and on the coast. Also, metropolitan locations like Greensboro and Winston-Salem, medium-sized towns such as Gastonia and Rocky Mount, and rural areas Down East and in the mountains are all in transition.

Recently I took a hard look at our state's local economies in a quest to find factors related to economic growth among the many North Carolinas. No question, the dominant factor driving economic growth during the last three decades has been education. Regions with both more college-educated workers and bigger increases in the number of college-educated workers added more jobs and income. This should make sense as our economy has changed from valuing brain power more and brawn power less.

One urban/rural divide did emerge from my research.

This was that improvements in educational training of the workforce appeared to have less positive impact in rural communities than in urban areas. That is, the payoff in terms of gains in jobs and incomes from adding more college graduates to the local population seemed to be less in rural regions compared to urban ones. Research by economists in others states has found the same result.

There may be two possible explanations for this finding.

First, more education might work better in urban settings where there's a greater critical mass of highly educated workers to benefit from the interaction of advanced thinking. In other words, collaboration among smart people is often a key ingredient in getting the most from their training, and urban settings will naturally provide more opportunities for these interchanges.

Second, the educational "bang" in rural areas may be less because there's a greater chance that educated workers will leave the small town or farm for the big city. This rural to urban brain drain creates a dilemma for smaller communities. They need educated workers to attract today's "new economy" jobs, but the jobs must be there in the first place to motivate those workers to stay.

What this all means is that North Carolina's many economies face different challenges and different issues, and each needs different strategies to boost economic development.

Although our state lines define one North Carolina, I think you'll decide what the economic lines define are more numerous.

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Dr. Mike Walden is a William Neal Reynolds Professor and extension economist in the Department of Agricultural and Resource Economics of N.C. State University's College of Agriculture and Life Sciences. He teaches and writes on personal finance, economic outlook and public policy. The Department of Communication Services provides his You Decide column every two weeks. Earlier You Decide columns are at http://www.cals.ncsu.edu/agcomm/writing/walden/decide.htm